The Debate on Pension Systems: The Paradigmatic Cases of Chile and Spain

• Published date: 01 January 2019
• DOI: http://doi.org/10.1111/ajes.12262
• Author: Mario del Rosal,F. Javier Murillo Arroyo,Xabier Arrizabalo Montoro
• Date: 01 January 2019

The Debate on Pension Systems: The

Paradigmatic Cases of Chile and Spain

By Xabier arrizabalo Montoro*, Mario del rosal† and

F. Javier Murillo arroyo‡

abstract. This article is focused on pension systems in the light of two

case studies that are antagonistic within the capitalist economy. On

the one hand, the Spanish pension scheme, based on the principle of

intergenerational solidarity, was achieved by the working-class after

decades of struggle. It constitutes the backbone of the Spanish social

security system, thanks to the creation and development of indirect

and deferred wages. On the other hand, the Chilean pension scheme,

first imposed by the Pinochet dictatorship, is based on a funded

system and private management. It rejects the principle of solidarity

and, therefore, it makes impossible the construction of a decent

pension structure. The comparison of the Spanish and the Chilean

pension systems can be expressed in just one revealing fact: while the

average pension in Spain is 79 percent of the last salary earned,

benefits in Chile barely reach 33 percent for male workers and 25

percent for female workers. The analysis of both cases is framed in

American Jour nal of Economics and Sociology, Vol. 78, No. 1 (January, 2019).

DOI: 10 .1111/ajes.122 62

© 2019 American Journa l of Economics and Sociology, Inc.

*Professor at the Complutense University of Madrid (UCM) since 1993. Director of the

Instituto Marxista de Economía (IME). Co-Director of Research Group in Political

Economy Capitalism and Uneven Development. Director of Continuous Training Degree

Critical Analysis of Capitalism: Marxist Method and His Application to the Research of

Current Global Economy (UCM). Author of Capitalism and World Economy and numer-

ous other books and articles. Participant in many international congresses. Supervisor

of 15 doctoral theses. PhD in Economics. Other degrees in Planning, Public Policies and

Development, and Sociology. Email: xam@ccee.ucm.es

†Adjunct Professor at the Complutense University of Madrid (UCM). Author of several

articles and chapters about the European economy, Marxist economics, and monetary the-

ory. Researcher at the Instituto Marxista de Economía. PhD in Economics (UCM) and a de-

gree in Politics (National University of Distance Education, UNED). Email: mariodel@ucm.es

‡Adjunct Professor at the Complutense University of Madrid (UCM). Author of Marxist

Analysis of the “Spanish Miracle” (2018, Maia, Madrid). Published several articles about

income distribution and wages. Researcher at the Instituto Marxista de Economía. PhD

in Economics Email: fjmurillo@ccee.ucm.es

196 The American Journal of Economics and Sociology

terms of the critique of political economy, in direct opposition to the

current mainstream in economics. Instead of assuming methodological

individualism and a harmonious view of human societies, as orthodoxy

does, the critical paradigm conceives of capitalist economy as a

dialectical process determined by the existence of social classes with

different and opposed interests.

Introduction: T he Theoretic al Debate on Pension System s

Public pension systems have historically represented a triumph of the

working-class struggle to ensure decent living conditions in old age.

Thus, it is a deferred wage, a component of the total wage, which is

one of the key elements of social security.1

However, from the point of view of capital, public pensions are

always an obstacle to accumulation because they shield a part of

production in the form of wages and, hence, limit its opportunity

for investment. This happens increasingly due to recurrent crises,

such as the crisis of the 1970s, in which public pension systems were

openly questioned. The crisis unleashed in 2007–2008 intensified this

questioning, and the mainstream economic analysis—the orthodox

paradigm—helped to justify it by redoubling its critique of the viability

of the public pensions scheme.

This article compares two real cases to illustrate the importance

of how pensions are managed, as well as the role played by eco-

nomic theory in this respect. On the one hand, the Chilean case is

the epitome of the destruction of a public pension system. It was

imposed—not by chance—by a dictatorship. On the other hand, the

Spanish case shows the possibilities of a public pension system and

the subsequent attempts to dismantle it, which have been contested

by the working class.

For the questioning of public pension systems, capital is endowed

with a broad propaganda apparatus, which presents current ortho-

doxy as the only valid economic theory. This formulation, which is

dominant both academically and politically, combines a series of very

weak premises based in neoclassical economics. Its theoretical basis

is largely shared by the Keynesian version of orthodoxy. Its main as-

sumption is methodological individualism.